West Midlands Economic Impact Monitor – 30 May 2024

This month brings news of a General Election on 4 July, following on from the May local elections where Labour won 9 out of 10 mayoral elections, including in the West Midlands. This is happening against the backdrop of global growth rates above 3% and inflation falling rapidly globally. In the UK, the Consumer Prices Index has dropped to 2.3%.

Economy

Real wages – measured in terms of the goods that workers can buy with their regular wages – rose by 2% in the year to February 2024. This is faster than the average in recent years: real wages did not grow at all in the preceding 16 years. The positive side to this wage growth is that it has protected household incomes. However, real wages are rising faster than productivity per worker, which actually fell by 0.6% in the year to Q4 2023.
More than 1 in 5 (21%) trading businesses reported that their turnover had decreased in April 2024 compared with March 2024, which is broadly stable from last month. In contrast, 19% reported their turnover was higher, up 3 percentage points over the same period.
28% of trading businesses reported an increase in the prices of goods or services bought in April 2024 when compared with March 2024, up 3 percentage points from last month.
Online job adverts on 17 May 2024 decreased by 1% from the level in the previous week and were 19% lower than the equivalent week of 2023 (Adzuna).
The Consumer Prices Index (CPI) rose by 2.3% in the 12 months to April 2024, down from 3.2% in the 12 months to March.
The Consumer Prices Index including owner occupiers’ housing costs (CPIH) stands at 3.0% in the 12 months to April 2024, down from 3.8% in the 12 months to March.
Average UK private rents increased by 8.9% in the 12 months to April 2024 (provisional estimate), down from 9.2% in the 12 months to March 2024.
Average rents increased to £1,293 (8.9%) in England, £730 (8.2%) in Wales and £952 (10.0%) in Scotland, in the 12 months to April 2024.
The West Midlands Business Activity Index increased from 52.8 in March 2024 to 55.5 in April 2024, the strongest rate of growth since March 2022. The increase in activity was linked to a rebound in demand, new business gains and an improvement in the market sentiment.
The UK Business Activity Index increased from 52.8 in March 2024 to 54.1 in April 2024.
The West Midlands scored the second highest for business activity in April 2024.
The West Midlands Future Business Activity Index decreased from 79.7 in March 2024 to 78.7 in April 2024. Despite falling from March’s 26-month high, firms remained optimistic with 64% forecasting output growth in the upcoming twelve months. Optimism is linked to expectations of greater inbound tourism, recovery in the construction, new product releases and marketing efforts.
IDBR business creations in the UK in Q1 2024 was 85,485. 6.1% higher than Q1 2023, which was the lowest Q1 since the start of the quarterly series in 2017.
Business creation increased in 10 out of 16 industrial groups during this quarter compared with Q1 2023. The most significant increase in business administration and support services, which is up by 28%.
Business births in the WMCA area in Q1 2024 were 3,955. This figure was 13.5% (+470) higher than the number of business births in Q1 2023, this is above the UK growth of 6.1%. Excluding Solihull (-30.2% or -95), all areas in the WMCA area increased.
3% of responding West Midlands businesses reported that turnover in April 2024 had increased when compared to the previous calendar month. 39.6% of West Midlands businesses reported turnover had stayed the same. However, 25% had reported that turnover had decreased.
High costs have turned into real concerns for businesses across the Midlands, as the EY-Parthenon Profit Warnings Report notes in the first quarter of 2024. Listed companies in the Midlands saw an uptick in profit warnings with a total of nine issued – an 80% increase compared to the same period in 2023. These figures also represent the highest number of warnings recorded since Q4 2022. Nationally there was a decrease of 7%.
Insolvencies in England and Wales shot up by a fifth and remain at a level not seen since the 2008-09 recession. Corporate insolvencies increased by 18.4% in April to a total of 2,177 compared to March’s figure of 1,838, and by 52.7% in comparison with the pre-coronavirus figure of 1,426 in April 2019.
Savills data reveals Birmingham saw a rise in office take-up, reaching 203,385 sq ft in Q1 2024. This was a 32% increase compared to Q1 2023 and an 11% and 19% increase against the five and ten-year averages, respectively. Due to this demand and a shortage of space, the headline rent has risen to £42.50 per sq ft, with expectations of reaching £43.50 per sq ft by the end of the year.

Innovation

UK innovation has fallen to its lowest level in over a decade. The percentage of businesses actively engaged in innovation dropped by 9 percentage points from 45% in 2018-20 to 36% in 2020-22. This decline, coupled with a recent fall in private research and development (R&D) investment, raises concerns about the UK’s ability to compete in the global innovation landscape.
In 2020-22, 36.3% of UK businesses were innovation active. This is a decrease compared to 44.9% in 2018-2022.
Large businesses were more likely to have innovated than small and medium enterprises (SMEs). In 2020-2022, 49.5% of large businesses were innovation active, compared to 35.9% of SMEs.
The percentage of innovation-active businesses was highest in England (37.1%) in 2020-2022. In Scotland and Northern Ireland, 32.4% and 32.1% respectively of businesses in 2020-2022 were innovation-active, compared to 30.9% in Wales.
4% of West Midlands (Region) businesses engaged in innovation activity in 2020 to 2022. Across the English regions, the South East was the highest at 40.2% down to the North West and the East Midlands the lowest, both at 35.1%. The largest percentage point decreases of 13 percentage points were in the West Midlands, and Yorkshire and the Humber.

Labour market

The West Midlands region employment rate (aged 16–64 years) was 73.9%. Since the three months ending December 2023, the employment rate decreased by 0.4 percentage points (pp). When compared to the same period in the previous year, the employment rate was 0.6pp higher.
The UK employment rate was 74.5%, a decrease of 0.6pp when compared to the previous quarter and a decrease of 0.8pp when compared to the previous year. The highest employment rate within the UK for the three months ending March 2024 was in the South East with 78.6% and the lowest in the North East with 69.1%, the West Midlands ranked among the middle of all regions.
The West Midlands region unemployment rate (aged 16 years and over) was 5.1%, which has increased by 1.2pp since the previous quarter (joint highest increase with the North West) but was a 0.2pp decrease when compared to the previous year. The UK unemployment rate was 4.3%, an increase of 0.5pp from the previous quarter and a 0.3pp increase compared to the previous year.
The highest unemployment rate in the UK for the three months ending March 2024 was in the East Midlands with 5.6% and the lowest in Northern Ireland with 2.1%. The West Midlands had the third highest rates across all regions.
The West Midlands region’s economic inactivity rate (aged 16–64 years) was 22.1%, which has decreased by 0.3pp since the previous quarter and a decrease of 0.5pp when compared to the previous year. The UK economic inactivity rate was also at 22.1%, but with an increase of 0.2pp when compared to the previous quarter and a 0.6pp increase from the previous year. The highest economic inactivity rate in the UK for the three months ending March 2024 was in Wales with 28.0%, with the lowest in the South East with 18.2%.
The number of payrolled employees fell in each of the regions of the UK between March and April 2024 but is above April 2023 levels.
There were 127,455 claimants in the WMCA area in April 2024. Since March 2024, there has been an increase of 0.3% (+420) claimants in the WMCA area, while the UK increased by 0.4%.
Compared to April 2023 WMCA claimants have increased by 0.1% (+130), UK increasing by 1.9%.
Overall, for the WMCA the number of claimants as a proportion of residents aged 16-64 years old was 6.9% compared to 3.8% for the UK in April 2024.
25,080 youth claimants in the WMCA area in April 2024. Since March 2024, there has been a decrease of 0.1% (-20) of youth claimants in the WMCA area, while the UK decreased by 0.6%.
When compared to April 2023, youth claimants have increased by 9.3% (+2,135) in the WMCA area, with the UK increasing by 4.9%.
In the WMCA area, the number of claimants as a proportion of residents aged 18-24 years old was 8.8% compared to 5.1% for the UK in April 2024.
0% of responding West Midlands businesses reported experiencing a shortage of workers whereas 66.4% reported no shortages.
0% of responding West Midlands businesses reported experiencing difficulties in recruiting employees in April 2024, whereas 54.0% experienced no difficulties in recruiting.

Social trends

The most commonly reported issues facing the UK today were the cost of living (87%), the NHS (85%), the economy (68%), climate change and the environment (61%), crime (59%) and housing (58%).
Just over half of adults (55%) reported that their cost of living had increased over the last month, 42% said their cost of living had remained the same, and 3% said it had decreased.
Rises in the price of their food shopping (94%), their fuel (61%) and their gas and electricity bills (53%) continue to be the most commonly reported reasons for an increase in their cost of living.

Mayoral election results

There was an extremely tight election between the Conservatives and Labour for the West Midlands Combined Authority, with the Labour candidate Richard Parker elected as Mayor, with a less than 1% difference in the vote share between Labour and Conservative.

Measuring success in levelling up

Inconsistent data over geographies and time period create difficulties for analyses. To measure and understand change, there is a need for consistency in data collection and geographies.
Lack of clear monitoring and targets for levelling up missions leads to varying interpretations and methods for understanding performance.

University-related migration

There are significant differences in migration outcomes among students and graduates across the UK. London, for example, benefits disproportionately from a substantial influx of graduates, with a ratio of 1.72 for post-university workplace numbers of graduates relative to pre-university (“domicile”) numbers.
Overall, only 17 out of the 53 UK subregions see net gains in numbers from the “going away to university” process. Many such “net gainers” include major cities and/or national capitals that naturally attract young talent.
A reliance on “home-grown” graduates in other areas (e.g. Northern Ireland and Glasgow) provides a different picture and highlights the importance of strategies that both retain local talent and entice newcomers.

West Midlands Economic Impact Monitor 30 May 2024.

This blog was written by Anne Green, Professor of Regional Economic Development and Co-Director at City-REDI / WMREDI, University of Birmingham.

Disclaimer:
The views expressed in this analysis post are those of the authors and not necessarily those of City-REDI, WMREDI or the University of Birmingham.